Amazon faces increased EU scrutiny over recommendation algorithms and ad transparency

In its latest move against the big marketplace, the European Commission on Friday sent another request for information (RFI) to Amazon regarding the company’s compliance with EU digital services rules.

The developments highlight areas where EU law enforcement is tightening scrutiny of the e-commerce giant, with the bloc demanding more information on Amazon’s recommendation systems, advertising transparency rules and risk assessment measures.

The Commission’s previous request for information to Amazon, in November last year, focused on assessing risks and mitigating the effects of the spread of illegal products; and protecting fundamental rights, including in relation to recommendation systems. A Commission spokesperson confirmed that the e-commerce giant had received three requests for information in total – following a January request for more information on how it shares data with researchers.

The EU Digital Services Act (DSA) requires platforms and services to adhere to a range of governance standards, including in areas such as content moderation. In the case of online marketplaces, the law also requires them to implement measures to address the risk of selling illegal goods. Larger marketplaces such as Amazon have an additional layer of obligations around algorithmic transparency and accountability within the system – and this is the focus of the Commission’s RFIs.

The additional rules have been in place for Amazon since late August last year, following its designation as a very large online platform (VLOP) by the EU in April 2023. Enforcing these additional obligations with regard to VLOPs is the Commission’s job.

While it remains to be seen whether the Commission’s latest request for information for Amazon will lead to a formal DSA investigation, the stakes remain high for the e-commerce giant. Any confirmed breaches could prove costly, with fines for violating pan-European law potentially reaching as much as 6% of global annual turnover. (NB: The company’s full-year revenue for 2023 was $574.8 billion, meaning — on paper at least — its regulatory exposure is in the double-digit billions.)

In a press release, the Commission detailed its actions, saying it had sent Amazon an RFI on the measures it had taken to comply with the DSA’s rules on transparency of recommendation systems and their parameters. It also said it was asking for more information on Amazon’s provisions for maintaining an ad repository — another legally required step in transparency for larger platforms.

The commission also said it wants more details on Amazon’s risk assessment report. The DSA requires VLOPs to both proactively assess systemic risks that may arise on their platforms and take steps to mitigate issues. Platforms must also document their compliance process.

“In particular, Amazon is asked to provide detailed information on its compliance with the rules on transparency of recommendation systems, the input factors, features, signals, information and metadata used in such systems, and the options offered to users to opt out of profiling in recommendation systems,” the EU wrote. “The company must also provide more information on the design, development, implementation, testing and maintenance of the Amazon Store Ad Library web interface and supporting documents for the risk assessment report.”

The EU has given Amazon until July 26 to provide the requested information. After that, any further steps will depend on an assessment of the response. However, failure to provide a satisfactory response to the RFI could itself result in sanctions.

Last year, the EU listed online marketplaces as one of several priority issues for enforcing the DSA’s VLOP rules. And it has been watching the area closely.

Late last month, it sent separate RFIs to rival market VLOPs Shein and Temu — shortly after the pair were designated. Although in their case, the Commission’s RFIs also raised concerns about the risks of illicit goods and manipulative design (including as a potential threat to child safety), and it also asked them for more information about how their own recommendation systems worked.

Why is there so much interest here? Algorithmic sorting has the power to influence the entire experience of platform users by determining the content and/or products they see.

In short, the EU wants the DSA to open up such AI systems’ black boxes to ensure that platforms’ commercial goals—attracting users’ attention and/or boosting sales—are not the only thing programming these automated decisions. It therefore wants the DSA to act as a shield against the risk of social harm caused by AI, such as platforms promoting content that is harmful to people’s mental health or recommending that shoppers buy unsafe products. But achieving this goal will require enforcement.

Amazon, meanwhile, is unhappy with the EU regime. Last year, it challenged the DSA’s VLOP designation. And last fall, it obtained a temporary stay of one element of VLOP compliance with the DSA—namely, the requirement to publish an ad library. But in March, the General Court of the European Union overturned the earlier decision, lifting the partial stay.

“Following its designation as a Very Large Internet Platform and the Court’s decision to deny Amazon’s request to stay its obligation to make its ad repository publicly available, Amazon is required to comply with the full set of DSA commitments,” the Commission wrote today. “This includes urgently identifying and assessing all systemic risks relevant to its service, providing an option in its recommendation systems that does not rely on user profiling, and making its ad repository publicly available.”

Given that Amazon spent money on lawyers to argue why it shouldn’t be required to comply with the DSA’s ad library element — and the subsequent overturning of the suspension — it’s not too surprising that this is one area where the Commission now wants more information.

The EU has been contacted with questions. A Commission spokesperson confirmed that the first RFI to Amazon, from November 2023, “was strongly focused on the dissemination of illegal products and the protection of fundamental rights online” and also asked questions about its recommendation systems.

The second RFI, in January 2024, focused on measures Amazon had taken to ensure access to data by authorized researchers, according to a spokesperson. They said the latest RFI is heavily focused on measures taken to meet DSA obligations related to transparency of recommendation systems and their parameters, as well as provisions related to maintaining an ad repository.

“These are indeed different areas that we are investigating,” the spokesperson added. “However, you are correct in saying that today’s RFI also follows the Court’s decision to deny Amazon’s motion to stay its obligation to make the ad repository publicly available.”

We also contacted Amazon to obtain a response to the Commission’s request for information.

A company spokesperson sent TechCrunch the following statement: “We are reviewing this request and working closely with the European Commission. Amazon shares the European Commission’s goal of creating a safe, predictable, and trusted shopping environment. We believe this is important for all participants in the retail industry, and we invest significant resources to protect our store from bad actors, illegal content, and create a trusted shopping experience. We have built on this strong foundation of DSA compliance.”

This report has been updated with the Commission’s responses.